Private Placement Industry Insights as of December 31, 2023

Wednesday, January 17th, 2024 and is filed under Industry Reporting

We recently released our December Private Placement Insights report. See the highlights from the report below, or if you are an AI Insight by iCapital subscriber, log in now to see the entire report.

• Fifteen new private placements were added to investment product training in December, for a total of 203 new funds added for the full year. This was a slower year than last, with a strong start but a mid-year trough, especially in the real estate categories. Despite growth in energy, hedge funds, and preferred offerings, which tend to represent a smaller component of the education platform, overall new fund activity is well below last year. 38% fewer funds were added, and those that have been added are seeking to raise 58% less capital.
• While activity has slowed, we have seen continued additions of funds providing access to private equity and hedge fund strategies that were either previously not available to individual investors or available to investors overseas. These feeder or access funds adding investment product training is a positive sign for the private markets industry – investors who make informed decisions stay invested longer. Additionally, we continue to see new sponsors adding education for their funds.
• As of January 1, 2024, AI Insight by iCapital covers 268 private placements currently raising capital, with an aggregate target raise of $50 billion and an aggregate reported raise of $33 billion or 66% of target.
• The average size of funds currently raising capital is $187 million. Funds range in size from $3.8 million for a real estate property improvement fund to a recently increased $13.6 billion AUM for a diversified private equity and debt fund.
• Real estate-related funds, including 1031s, Opportunity Zone funds, and non-1031 real estate LLCs, LPs, and private REITs represent 73% of the total number of funds and 51% of aggregate target. The percentage of target is down significantly as larger private equity and hedge funds have been added along with the slowdown in real estate. Additionally, private equity’s share of the target raise is likely much higher because, despite the closing of the large private equity fund, there are 12 funds that do not report a target or capital raise, as they are seeking instead to raise a percentage of a larger, institutional fund rather than a specific dollar amount.
• In terms of coverage by general objective, income has been and remains the largest component at 54% of funds, while growth and growth and income follow at 25% and 20%, respectively.
• 61% of private placements we cover use the 506(b) exemption, 32% use 506(c) and 7% have not yet filed their Form D with the SEC.
• Forty-one private placements closed to new investors in December and 203 closed for the full year 2023. The 170 funds that reported a raise at close were on the market for an average of 314 days and raised 88% of target on average.
• iCapital recently released its 2024 Market Outlook, which forecasts a mix of lower inflation and Fed rate cuts along with a broader set of opportunities for investors than in 2023. In this context, the top ideas for 2024 include newer vintage venture capital, and unprofitable technology (a beneficiary of rate cuts) for growth, direct lending, real estate debt, and municipal bonds for income, and macro hedge funds for diversification.
• Along with the Outlook, iCapital released its Q4 Alternative Asset Class Strategy Rankings, which rates each asset class as negative, neutral, or positive along with the trend from the prior quarter. In this iteration, iCapital upgraded early and late-stage venture capital to neutral and positive, respectively. Within the real assets category, energy was upgraded to positive. All other asset classes remained the same. Real estate was separated into core and value-added, “to better reflect the opportunities within this large asset class.” The firm is positive on value-add and opportunistic real estate strategies but maintains its negative view on core real estate given that they “continue to see challenges ahead for core real estate.”

Source: AI Insight by iCapital, as of December 31, 2023. Based on programs activated on the AI Insight platform as of this date.

For illustrative purposes only. Past performance is not indicative of future results. Future results are not guaranteed and loss of principal may occur.

 

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Source: AI Insight by iCapital, as of December 31, 2023. Based on programs activated on the AI Insight platform as of this date.

Activated means the program and education module are live on the AI Insight platform. Subscribers can view and download data for the program and access the respective education module.

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